Oil prices fell on Monday after the long Christmas weekend, with US crudes defending a newly gained premium over internationally traded Brent contracts in quiet trading ahead of the end of the year.
Front-month US West Texas Intermediate (WTI) futures were trading at $37.87 per barrel at 0311 GMT, down 23 cents from their last settlement.
Brent was down 16 cents at $37.73 a barrel, meaning that US crude defended a premium it gained over the globally traded benchmark last week.
Trading volumes were down for both contracts in the post-holiday period. Only about 5,000 WTI contracts have changed hands so far during this trading session on Monday versus 8,953 contracts at this point in the trading session on December 7.
The US market tightened slightly in December following reduced drilling activity, withdrawals from near record crude stockpiles and the prospect of crude exports following a 40-year export ban.
“The biggest adjustment to prices comes from WTI gaining premium over the Brent. This was mainly followed by the US lifting its ban on crude oil exports,”’ Singapore-based Phillip Futures said on Monday.
The brokerage added that it expected “a quiet week ahead” with the biggest expected news for energy markets likely coming from US inventory data to be published on Wednesday and Thursday.
While the US slightly tightened, international markets remain over supplied as producers like Russia and the Organization of Petroleum Exporting Countries (OPEC) produce between half a million and 2 million barrels of crude every day in excess of demand.
At the same time, developed and emerging economies especially in Asia are slowing.
Japan’s industrial output fell 1.0 per cent in November from the previous month, government data showed on Monday, suggesting that sluggish emerging market demand continues to cloud the outlook for the economy.
In Japan’s refining sector, top oil refiner JX Nippon Oil & Energy Corp said on Monday it would trim its domestic crude refining plans in January from a year earlier, due to unspecified problems with its refining operations and scheduled maintenance.
The company, the core business unit of JX Holdings Inc, said it would process 1.11 million barrels per day (5.49 million kilolitres) of crude oil in January for domestic consumption, down 2 per cent from a year earlier.
Japan’s domestic demand has been easing due to a shrinking population, while a decline in kerosene demand accelerated this month due to warmer temperatures, a spokesman said.
In 2014, Japan was the third-largest global oil consumer, closely followed by India, according to the BP Statistical Review of World Energy.